By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-09-07 16:13

China's major stock index tumbled more than two percent on Friday after the central bank ordered commercial banks to set aside more money as reserves for the seventh time this year.

The benchmark Shanghai Composite Index dropped 116.48 points, or 2.16 percent to close at 5,277.17 points. The Shenzhen Composite Index decreased 1.91 percent to 1,457.80, and the CSI 300 Index was down 2.17 percent to 5,294.79.

The fall came after the People's Bank of China (PBOC) announced a hike in commercial banks' reserve requirement ratio by 50 basis points to 12.5 percent, effective September 25, in an effort to curb credit growth.

In addition, the PBOC issued 151 billion yuan of bills with a maturity of three years on Friday, further reducing the money available to banks for lending.

There is too much money in the financial market and the PBOC needs to take more action, said PBOC Governor Zhou Xiaochuan Friday at a forum in Xiamen, East China's Fujian Province, according to Bloomberg News.

Fewer than 300 of the more than 1,300 A-share companies in the Shanghai and Shenzhen stock exchanges posted increases.

Financial shares were hardest hit, with the Bank of China falling 3.13 percent to close at 6.19 yuan per share. The Industrial and Commercial Bank of China dropped 2.01 percent to 6.81 yuan.

However, Huaxia Bank bucked the trend, rising 4.10 percent to 22.08 yuan, followed by Bank of Nanjing's 1.42 percent increase to 22.08 yuan.

In the insurance sector, China Life dropped 2.71 percent to 53.91 yuan, while its rival Ping An of China declined 3.19 percent to 96.79 yuan.

Sinopec also pushed down the market, decreasing 3.44 percent to 16.86 yuan, while Baosteel fell 3.58 percent to 18.87 yuan.

In the real estate sector, China Vanke tumbled 3.94 percent to 31.98 yuan.